Tips on Buying Metro-Charlotte Real Estate with your IRA

While most people understand that real estate is an investment, many people are taking advantage of the qualified retirement accounts to purchase real estate as an appreciating or revenue-generating instrument like IRAs.

It’s really important to understand the tax implications, legal ramifications, and various other intricacies of purchasing Metro-Charlotte real estate within your IRA.

If you don’t have a self-directed type IRA… first off… you’ll need to connect with your trusted financial advisor to find a reputable and low fee self-directed IRA. Or, connect with us and we can direct you to some very good self-directed IRA companies we’ve worked with in the past.

Open a Self-Directed IRA

The first step for purchasing investment properties in Metro-Charlotte within your IRA is to open a “self-directed” IRA. You can do this by visiting a qualified financial advisor or other trusted fiduciary to act as the IRA custodian. A fee-only financial advisor can help you set up this account with minimal hassle, while a commission-based financial advisor may attempt to steer you clear of purchasing tangible assets within your IRA (he or she won’t earn much on the investment).

Types of Properties You Can Buy With Your IRA and Rules

You can own a wide variety of properties within your IRA, including residential, commercial, and industrial structures, as well as unused land. Many savvy investors choose to purchase parking lots, storage unit facilities, and other types of property that require little maintenance, but generate steady income.

Your IRA cannot own any home where you live or vacation. Legally, you aren’t even allowed to spend one night in the property. You cannot avoid this restriction by “renting” the property from your IRA, or renting to your spouse, children, grandchildren, parents, or grandparents, nor can you use an IRA to purchase property from close family. You could, however, rent to property to a sibling, cousin, or friend. A solution that many investors implement is to purchase a home for their IRA, rent it out for income until retirement, then assume residence upon retirement.

How Does Income Work With Real Estate In An IRA?

The income generated in your IRA may not be used for your “personal current benefit.” This means that all income generated by the property must remain within the IRA until you retire. Selling the property will require you to leave all profits within your IRA. Also, property taxes, insurance, improvements, and other costs associated with the property must be paid by the IRA. Failure to comply with these regulations could disqualify your IRA, subjecting you to income taxes on the entire value of the property, plus a 10% early distribution penalty.

It’s important the all distribution rules associated with an IRA (or Roth IRA) including taxation, required minimum distributions, beneficiaries, and other factors do not change when using a self-directed IRA to purchase property. There can be a huge upside to real estate in your IRA, but it’s best to know exactly what’s in store.

About Gene & Nadia White

With more than 25 years of experience in Real Estate, we are always working on finding creative solutions for you. Whether you buy or sell a home, we will help you. Even if we do not profit from it. We always have your best interest in mind. Our mission is to beautify our community, by restoring homes and giving families the opportunity to thrive and enjoy their home.

We are a real estate solutions and investment firm. We specialize in finding value added real estate opportunities and executing on those opportunities to revitalize our community.
We create thriving income properties and partner with qualified investors to help them participate in this real estate market. This is not a solicitation or offer of securities. Investment is offered only to qualified investors through a written Investment Agreement or Private Placement Memorandum.
We will not be acting as your real estate agent or broker if we buy your house, sell you a house, or rent you a home. We are excited to potentially work with you directly OR if you are represented by an agent or broker. We are focused on improving neighborhoods and redeveloping areas that we work in. If you have additional questions on agencies please contact your local real estate commission.
Furthermore, we are not attorneys and we do not provide legal advice. Please consult your attorney before making any legal decision.